By Mark DeCambre and Joy Wiltermuth
The Dow industrials closed modestly higher Monday, booking a fourth straight day of gains, as energy and bank shares rose with rallying Treasury yields. But the move in rates also caused headwinds for rate-sensitive areas of the market, including technology.
What did major indexes do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.08% added 71.37 points, or 0.2%, ending at 34,869.37, after hitting a intraday peak at 35,061.12 .
The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.25% slumped 12.37 points, or 0.3%, closing at 4,443.11.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.95% retreated 0.5%, or 77.73 points, to finish at 14,969.97, after touching a low of 14,864.96 earlier Monday.
The small-capitalization Russell 2000 index /zigman2/quotes/210598147/delayed RUT +0.44% advanced 1.5%.
On Friday, the Dow rose 33 points, or 0.1%, to 34798, the S&P 500 increased 7 points, or 0.15%, to 4455, while the Nasdaq dropped 5 points, or 0.03%, to 15048.
What drove markets?
Climbing bond yields served as a catalyst for stocks Monday, with the benchmark 10-year Treasury rate briefly topping 1.5% , its highest since June, according to FactSet. Yields and prices move in opposite directions.
Rising yields can increase the discount rate for tech-related stocks and highly valued sectors, while helping to boost shares of financials whose business models benefit from higher longer-end rates. Goldman Sachs Group Inc. /zigman2/quotes/209237603/composite GS -0.36% shares advanced 2.3%, while the Financial Select Sector SPDR ETF /zigman2/quotes/209660484/composite XLF 0.00% rose 1.3%. The U.S. oil benchmark CLX21 settled at $75.45 a barrel on Monday, near a 3-year high.
An energy crisis sweeping the globe was another catalyst for equities on Monday. Power shortages led to forced factory production cuts in China , while in the U.K., a shortage of truck drivers led to hoarding and declining inventories at gas stations.
Analysts at Goldman Sachs hiked their oil-price forecast to $90 a barrel , citing the impact of what it said was the most bullish hurricane in U.S. history on supply. The Energy Select Sector SPDR ETF /zigman2/quotes/206420077/composite XLE -2.02% jumped 3.4% as oil prices continued to press higher.
“That’s because of supply constraints and strong demand,” said Kent Engelke, chief economist strategist at Capitol Securities Management, adding that unlike the Arab oil embargo of the 1970s, current energy shortages follow moves by Western governments to cut carbon emissions and curtail the fossil fuel industry, including by making it “prohibitively expensive” for banks to lend in the sector.
“But the technology is not there yet,” Engelke said of solar and wind energy alternatives.
Energy disruptions have highlighted what’s been a growing issue for the global economy, namely that supply hasn’t recovered as fast as demand in a variety of markets. Costco Wholesale /zigman2/quotes/201191698/composite COST +1.00% last week said it imposed limits on purchases of toilet paper and water.
Orders for durable goods surged 1.8% in August, largely thanks to more demand for Boeing jetliners, but continued supply shortages held back auto makers and remained a drag on the U.S. economic recovery. Economists surveyed by The Wall Street Journal had forecast a 0.6% rise.
Investors continued to cast a wary eye on the impact of China Evergrande’s /zigman2/quotes/208605330/delayed HK:3333 +8.55% debt troubles on the world’s second-largest economy, while elections in Germany, the No. 1 European economy, have so far failed to produce a decisive result in what’s expected to be months of coalition talks.
The clock also has been ticking for Congress to pass a funding measure to avoid a government shutdown at midnight Thursday, with gridlock in Washington also raising concerns about a potential U.S. default this fall.